The figures show petrol prices continued to slide in the month, down 1.5 pence a litre, although this was less than the 3p a litre drop seen a year earlier. An ongoing lack of pricing power is clearly evident in the business survey data despite the robust pace of economic growth being witnessed in the fourth quarter, with PMI surveys showing average prices charged for goods and services unchanged in November.
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The annual rate of inflation has risen, despite a surprise fall in clothing costs as retailers battle to sell winter ranges in mild weather.
The UK’s brief period of negative inflation is expected to have come to an end in November but the recent tumble in oil prices should keep price pressures low for some months yet, economists predict.
But the ONS said the drop also followed a hefty increase in clothing prices between September and October. Britain’s inflation has stuck in a narrow range between plus and minus 0.1 per cent since February, largely due to a slump in oil prices late past year, and is far below the Bank of England’s 2 per cent target.
Rates were slashed during the downturn and have stayed at the all-time low for more than six years. “This is a theme that is set to continue in the coming months as moderate further falls in the price of petrol this year are outweighed by bigger declines a year earlier”, he said.
“Falling prices for oil and other commodities are helping drive down companies’ costs”. But its decision came as the US Federal Reserve is poised later this week to make its first interest rate increase in almost a decade, while monetary policy in Europe is moving in the opposite direction.
If the USA decides to raise interest rates, it would be the first time they have done so since 2006 and some fear a rise could trigger widespread market disruption.
Chris Williamson, chief economist at Markit, said: “The outlook for inflation has become increasingly benign”.
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While oil prices have much responsibility in subduing prices internationally, measures of core inflation-which exclude the price of energy, food, alcohol and tobacco-are also depressed. Retail price inflation – an older measure which the ONS says is no longer accurate but is still used to settle inflation-linked government bonds and many commercial contracts – jumped to 1.1 per cent from 0.7 per cent, the sharpest month-to-month pick-up in the annual rate in over three years.
